Question: 2. Consider the utility function of an individual given by u(x) = ln(x - 10, 000). His total wealth is $270,000 of which $170,000 is

2. Consider the utility function of an individual given by u(x) = ln(x - 10, 000). His total wealth is $270,000 of which $170,000 is the worth of his house. There is 10% probability that his house may be destroyed by re. (a) What is the risk attitude of this person? (10%) (b) Calculate the insurance premium, fair premium and risk premium. (15%) (c) What is the relationship between the insurance premium, fair premium, and risk premium? (15%)

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